India Central Bank to Tighten Banking Rules
By ROMIT GUHA
NEW DELHI--The Reserve Bank of India said Friday it will announce steps by the end of June to tighten the country's banking regulations, including those dealing with some non-core operations of banks such as wealth-management services.
The central bank is looking to tighten the rules following allegations that the employees of some banks helped their customers evade taxes. Investigations by the RBI into the allegations "revealed the need for better regulatory compliance by banks," the central bank said in its annual monetary-policy statement.
The RBI didn't name any banks in the statement.
In March, a local news website, Cobrapost.com, published videos purportedly showing employees of three banks giving advice to its reporter posing as a customer on how to hide money from the tax authority. The reporter used a hidden camera to record dozens of conversations with bank employees about investing up to $2.8 million.
On March 18, the central bank said it had started investigating the allegations and that its findings would be completed by March 31. Depending on the outcome of the probe, it would decide whether to take any actions, the RBI had said.
On Friday, the RBI said the guidelines to be issued next month would also cover non-core services like marketing and distribution of mutual funds and insurance products by banks.
During the probe, the RBI said, it observed that some banks were not carrying out customer due diligence while marketing and distributing such products.
Some banks have also not clearly segregated the duties of employees providing banking services and those marketing the products of other financial-services providers, it said.
"Bank employees were directly receiving incentives from third parties such as insurance, mutual-fund" companies, the RBI said. This may lead to misselling, the central bank said.
Banks offering wealth-management services could face risks to their reputation including from misselling of products, conflict of interest and fraud, the RBI said.
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